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United States Government Accountability Office:
GAO:
Testimony:
Before the Subcommittee on Government Operations, Committee on
Oversight and Government Reform, House of Representatives:
For Release on Delivery:
Expected at 2:00 p.m., EST:
Wednesday, February 27, 2013:
Federal Real Property:
High-Risk Designation Remains due to Persistent Management Challenges:
Statement of David Wise, Director:
Physical Infrastructure:
GAO-13-422T:
GAO Highlights:
Highlights of GAO-13-422T, a testimony before the Subcommittee on
Government Operations, Committee on Oversight and Government Reform,
U.S. House of Representatives.
Why GAO Did This Study:
The federal government has given high-level attention to the issue of
real property management and has made some progress. This includes
establishing FRPC-—chaired by the Office of Management and Budget
(OMB)-—which created the FRPP database managed by GSA. However,
federal real property management remains a high-risk area, in part,
because of the long-standing problems the federal government has faced
managing its excess and underutilized properties.
This statement summarizes GAO’s 2013 High Risk update as it pertains
to real property management and elaborates on problems associated with
excess and underutilized property, drawing on a June 2012 GAO report
(GAO-12-645). In that report, GAO recommended that GSA, in
consultation with FRPC, develop a plan to improve the FRPP and that
OMB develop a national strategy for managing federal excess and
underutilized real property. GSA agreed with the recommendation and
described actions its officials are taking to implement it. OMB did
not directly state whether it agreed or disagreed with the
recommendation. A full discussion of these recommendations and GAO’s
evaluation of them can be found in the June 2012 report.
This statement is based on previous GAO work where GAO analyzed agency
data and visited 26 sites containing excess and underutilized
buildings from five civilian federal real-property-holding agencies
with significant portfolios.
What GAO Found:
The federal government faces long-standing problems in managing real
property, including an overreliance on leasing, and excess and
underutilized property. Related to leasing, the government owns and
leases about 400,000 buildings located throughout the country and
often leases private space in the same areas where it owns
underutilized property. This practice is inefficient, resulting in
millions of dollars of additional costs to federal agencies. Further,
agencies often do not have a strong understanding of the real property
held by other agencies and may lack the authority or expertise to
lease their own underutilized property to other federal agencies.
The federal government continues to face persistent challenges related
to its real property data. GAO examined Federal Real Property Profile
(FRPP) data, which is managed by the General Services Administration
(GSA), and identified inconsistencies and inaccuracies, at 23 of the
26 locations visited in 2011 and 2012, related to the reported
utilization, condition, annual operating costs, and value of
buildings. These findings raised concern that the FRPP is not a useful
tool for describing the nature, use, and extent of excess and
underutilized federal real property. These inconsistencies may arise
in part because the Federal Real Property Council (FRPC) has not
followed sound data collection practices. For example, the FRPC has
not ensured that the data elements used by federal agencies are
consistently defined and reported. As a result, the FRPC cannot ensure
that FRPP data are sufficiently consistent and accurate to use as a
decision-making tool for managing federal real property.
The previous and current administrations have sought to generate cost
savings associated with improving management of excess and
underutilized property. However, some of these efforts have been
discontinued and potential savings for others are unclear. It is
important to note that the five federal agencies that GAO reviewed
have taken some actions to dispose of and better manage these
properties, including using excess and underutilized property to meet
space needs, consolidating offices to use space efficiently, and
reducing employee workspace to use space more efficiently. However,
the agencies still face challenges managing these properties. For
example, property disposal costs can outweigh the financial benefits
of property disposal. Additionally, legal requirements-—such as those
related to preserving historical properties and the environment-—can
make the property disposal process lengthy, according to agency
officials. Finally, the interests of multiple-—and often competing—-
stakeholder interests may not align with the most efficient use of
government resources and complicate real property decisions. For
example, GSA officials reported that local stakeholder interests have
delayed conveyance of a federal building in Portland, Oregon. A
comprehensive, long-term national strategy would support better
management of excess and underutilized property by, among other
things, defining the scope of the problem; clearly addressing
achievement goals; addressing costs, resources, and investments
needed; and clearly outlining roles and coordination mechanisms across
agencies.
View GAO-13-422T. For more information, contact David Wise at (202)
512-2834 or wised@gao.gov.
[End of section]
Chairman Mica, Ranking Member Connolly, and Members of the
Subcommittee:
I am pleased to be here today to discuss federal real property
management, with an emphasis on challenges associated with managing
excess and underutilized real property. The federal government's real
property portfolio includes about 400,000 buildings located throughout
the country that are owned and leased by federal agencies. In 2004,
the President issued an executive order establishing the Federal Real
Property Council (FRPC).[Footnote 1] The executive order required the
FRPC to work with the General Services Administration (GSA) to
establish and maintain a single, comprehensive database describing the
nature, use, and extent of all real property under the custody and
control of executive branch agencies.[Footnote 2] The FRPC created the
Federal Real Property Profile (FRPP) to meet this requirement and
began data collection in 2005. As we have reported, despite the
implementation of the executive order, nationwide data collection
efforts, and various reform efforts and proposals, data problems have
continued and agencies continue to face persistent challenges with
managing real property.
In 1990, we began reporting on government operations that we
identified as "High Risk." Since then, generally coinciding with the
start of each new Congress, we have reported on these high-risk areas
and updated the High Risk List. My statement today summarizes our
recent High Risk update[Footnote 3] as it pertains to federal real
property management. As part of this objective, my statement also
elaborates on challenges associated with excess and underutilized
property, drawing on our June 2012 report on this subject.[Footnote 4]
For our June 2012 report on federal excess and underutilized property,
we analyzed Office of Management and Budget (OMB) and GSA documents,
and interviewed OMB, GSA, and other agency officials. We focused our
review on five federal real-property-holding agencies: GSA and, the
departments of Energy (Energy), the Interior (Interior), Veterans
Affairs (VA), and Agriculture (USDA). We selected these agencies
because, on the basis of the available data at the time, these five
agencies reported approximately two-thirds of the building square
footage reported by civilian agencies. We obtained and analyzed the
fiscal years 2008, 2009, and 2010 FRPP submissions from these agencies
and visited a nonprobability sample[Footnote 5] of approximately 180
buildings at 26 sites where excess or underutilized owned buildings
had been reported by the five civilian agencies.[Footnote 6] Our
representations of the condition and circumstances of individual
properties in this statement are based on information in our June 2012
report; it is possible that conditions or circumstances may have
changed since then. We conducted this work in accordance with
generally accepted government auditing standards. More detailed
information about the scope and methodology used for our June 2012
work can be found in that report.
Federal Real Property Management Continues to be High Risk:
The federal government continues to face long-standing problems in
managing its real property, including an overreliance on costly
leasing and persistent issues with excess and underutilized property,
and we have made a number of recommendations in this area.[Footnote 7]
The previous and current administrations have given high level
attention to the issue of federal real property management. For
example, in May 2011, the administration proposed legislation,
referred to as the Civilian Property Realignment Act (CPRA). CPRA,
among other things, would have established a legislative framework for
consolidating and disposing of civilian real property. However, this
and other real property reform legislation introduced in Congress have
not been enacted.
Costly Leasing:
The federal government's continued reliance on costly leasing has been
an ongoing problem. The government often leases space from private
landlords in the same real estate market where it owns underutilized
real property.[Footnote 8] This practice is inefficient, resulting in
millions of dollars of additional costs to federal agencies. From 2006
to 2011, the amount of space that GSA--the leasing agent for many
federal agencies--leased from the private sector grew more than 12
percent. At the same time, GSA lost millions of dollars on these
leased assets, even though agencies pay GSA rent and fees that are
designed to cover costs. GSA has lost $200 million on leases since
2005, including $75 million in 2011 alone. As a result, GSA has used
funds generated from its owned inventory to offset the losses, which
decreases the funds available to invest in GSA's owned assets. In some
cases, federal agencies in the same market could consolidate into
other government-owned properties. However, agencies do not have a
strong understanding of real property held by other agencies and may
lack the authority or expertise to lease their own underutilized
property to other federal agencies. We have ongoing work assessing
GSA's high cost leases that we plan to report later this year.
Excess and Underutilized Property:
I would like to elaborate on federal excess and underutilized
property, which we highlighted in the 2013 High Risk update. In our
June 2012 review, we found that FRPP data did not accurately describe
the properties at 23 of 26 sites that we visited, often overstating
the condition and annual operating costs. Our work focused on
reviewing agency-reported FRPP data elements including utilization,
condition index, annual operating cost, and value.
Utilization: We found that agencies did not report building
utilization consistently.[Footnote 9] For example, FRPC guidance
states that for offices, hospitals, and warehouses, utilization is the
ratio of occupancy to current design capacity.[Footnote 10] USDA
stated that FRPC has not established government-wide definitions for
occupancy or current design capacity. As a result, each agency within
USDA has its own internal procedures for determining a building's
utilization level. Among the 26 federal sites we visited, we found
utilization data inconsistencies or inaccuracies for properties at 19
of these sites. For example, at one USDA site we visited, we found two
houses that have been empty since 2009; however, they were both
reported to the FRPP as utilized for 2009 and 2010. See figure 1 to
view images of these two USDA buildings.
Figure 1: Example of Inaccurate Reporting of Utilization Data at a
USDA Site:
[Refer to PDF for image: illustrated table with 4 photographs]
Exterior and interior images: Vacant house since 2009 (2 photos);
Reported utilization (2009-2010)[A]: Utilized;
Actual occupancy according to local officials (2009-2010): Vacant.
Exterior and interior images: Vacant house since 2009 (2 photos);
Reported utilization (2009-2010)[A]: Utilized;
Actual occupancy according to local officials (2009-2010): Vacant.
Source: GAO analysis of VA information.
[A] According to FRPC guidance, housing units must be 85 percent to
100 percent occupied to warrant a utilization score of "utilized."
[End of figure]
Condition Index: According to FRPC guidance, the condition index
[Footnote 11] should consider a building's repair needs.[Footnote 12]
However, we found that agencies do not always follow this guidance. We
found condition-index-reporting inconsistencies and inaccuracies at 21
of 26 sites visited. For example, when agencies have determined that a
property is not needed and will ultimately be disposed of, they may
not repair that property, even though it may be in a state of
significant disrepair. This allows agencies to use their limited funds
to maintain properties that they regularly use. In some cases,
however, agencies gave such properties high condition-index scores
despite their relatively poor conditions, resulting in condition index
data that did not accurately reflect each property's condition as set
forth in FRPC guidance. Figure 2 illustrates several separate
buildings that received high condition index scores, even though they
are in poor condition. On the basis of our work, we found problems
with these buildings including: asbestos, mold, collapsed walls/roofs,
health concerns, radioactivity, deterioration, and flooding.
Figure 2: Examples of Federal Property Reported as Being in Excellent
Condition in the FRPP Database:
[Refer to PDF for image: 9 photographs]
* Old firehouse with collapsed ceiling;
* Cabin with collapsed roof;
* Warehouse with radiological contamination;
* Warehouse with a collapsed ceiling;
* Mostly vacant laboratory building with ceiling and wall damage;
* Cabin with large tree that has fallen through the roof;
* Vacant trailer with safety and health issues (rat and beehive
infestation). Now demolished;
* Warehouse with exterior damage;
* Building under renovation.
Source: GAO and Energy.
[End of figure]
Annual Operating Costs: We found data inconsistencies and inaccuracies
for annual operating costs at 19 of 26 sites that we visited.[Footnote
13] For example, we found that multiple agencies were unable to
measure operating costs at the building level. Instead, officials
apportioned costs to the individual buildings according to square
footage. Furthermore, because of the difficulty in measuring operating
costs, only one of USDA's component agencies even attempted to measure
the actual operating costs of each individual building. We also
identified instances of buildings with reported high annual operating
costs even though all utilities were turned off and no maintenance was
being conducted.
Value: FRPC guidance defines value as the cost of replacing an
existing constructed asset at today's standards, and this factor is
known as the Plant Replacement Value (PRV). However, GSA officials
cautioned us not to think of PRV as an asset's actual worth, because
it is not an appraisal of the property or any kind of measure of the
asset's market value. We found that the PRV is typically much higher
than the actual worth of the building because the PRV does not take
into account market conditions or the condition of the asset.
Additionally, according to agency officials, many excess properties do
not have the potential for generating revenue for the federal
government. Indeed, we saw more than 80 buildings on our site visits
that agencies plan to demolish when they have the resources to execute
the demolitions. Figure 3 shows properties that have high reported
values and high condition indexes even though they are in poor
condition and have remained unused for many years.
Figure 3: Empty Buildings in Poor Condition with High Plant
Replacement Values (PRVs):
[Refer to PDF for image: illustrated table with 6 photographs]
Property images: Biology Building (2 photos: vacant biology laboratory
building in poor condition);
Agency: Energy;
2010 reported PRV: $90,136,214;
2010 reported condition: 88%;
Status: The building has been shutdown for many years and is awaiting
demolition.
Property images: Veterans' Center (2 photos: vacant Veterans' Center
building in poor condition);
Agency: VA;
2010 reported PRV: $1,673,690;
2010 reported condition: 100%;
Status: This building is inactive and has been empty for over ten
years.
Property images: Firehouse (2 photos: firehouse with collapsed
ceilings and mold);
Agency: GSA;
2010 reported PRV: $1,026,188;
2010 reported condition: 100%;
Status: This building is designated excess and has not been used for
10-12 years.
Sources: GAO analysis of agency data and Energy (Biology Building
photographs).
[End of figure]
These examples of inconsistencies and inaccuracies in the key areas
described above suggest that the FRPP database is not a useful
decision-making tool for managing federal real property. In addition
to our work at these sites, we found that FRPC had not followed sound
data collection practices when collecting FRPP data. Specifically, we
found, among other problems, issues with data consistency,
collaboration, and reporting. For example, the FRPC has not ensured
that data elements are consistently defined and reported, even though
the 2004 Executive Order seeks reporting on a uniform basis. In
addition, OMB, as the Chair of the FRPC, has not collaborated
effectively with the agencies that submit FRPP data and may be
requiring agencies to spend resources on data collection that is not
useful. The agencies we reviewed expressed concerns about the data
collection process, including the amount of data collection required,
the time they are given to implement new data requirements, and their
ability to collect data as required accurately.
Underlying Management Challenges:
In addition to the problems we found with real property data, we also
found that the federal government continues to face other challenges
managing excess and underutilized properties. The previous and current
administrations have sought ways to generate cost savings associated
with improving management of excess and underutilized properties.
However, some of these efforts were discontinued, and others have not
led to proven cost savings associated with the management of these
properties. It is important to note that the five federal agencies we
reviewed have taken some actions to dispose of and better manage these
properties, including using excess and underutilized property,
consolidating offices, and reducing employee work space to use space
more efficiently. However, the agencies still face long-standing
challenges to managing these properties. For example, agency disposal
costs can outweigh the financial benefits of property disposal. Legal
requirements--such as those related to preserving historical
properties[Footnote 14] and conducting environmental remediation--can
make the property disposal process lengthy according to agency
officials. Finally, stakeholder interests can conflict with property
disposal or reuse plans, and the locations of some federal properties
can make property disposal and reuse difficult. For example, GSA
officials reported that local stakeholder interests have delayed
conveyance of a federal building in Portland, Oregon. At the time of
our review, the Department of Education planned to use the building
for educational activities beneficial to the community. However, the
officials received a request from the City of Portland that certain
offices that were already located in the building remain in downtown
Portland. GSA was attempting to find suitable space for these offices
in downtown Portland so that it could convey the building to the
Department of Education.
Given the complexities of issues related to excess and underutilized
federal real property management, unsuccessful implementation of cost
savings efforts across administrations, and the issues that still
remain with data reporting, we believe that a national strategy could
provide a clear path forward to help federal agencies manage excess
and underutilized property in the long term. A national strategy can
guide federal agencies and other stakeholders to systematically
identify risks, resources needed to address those risks, and
investment priorities, when managing federal portfolios. Without a
national strategy, the federal government may be ill-equipped to
sustain efforts to better manage excess and underutilized property.
Agency Corrective Actions:
Sustained progress is needed to address the conditions and persistent
challenges that make the area of federal real property management High
Risk. Multiple administrations have committed to a more strategic
approach toward managing real property. However, their efforts have
not yet fully addressed the underlying challenges that we have
identified.
In our June 2012 report, we recommended that OMB, in consultation with
FRPC, develop a national strategy for managing federal excess and
underutilized real property. OMB did not directly state whether it
agreed or disagreed with our recommendation. Additionally, FRPP is not
yet a useful tool for describing the nature, use, and extent of excess
and underutilized federal real property. Accordingly, in the same
report, we recommended that GSA and FRPC take action to improve the
FRPP to increase federal capacity to implement and monitor corrective
measures. GSA has taken action to begin implementing our
recommendation related to FRPP. GSA's actions are intended to address
each part of the recommendation, including:
* enhancements to clearly define data collection requirements,
* data quality tests and assessments to ensure data reliability,
* development of new performance measures to support government-wide
goals, and:
* efforts to improve collaboration with agencies.
We will continue to monitor these agencies' efforts to implement our
recommendations, which we believe are critical to addressing the
challenges that have led us to keep federal real property management
on our High-Risk List.
Chairman Mica, Ranking Member Connolly, and Members of the
Subcommittee, this concludes my prepared statement. I would be happy
to answer any questions that you may have at this time.
GAO Contacts and Staff Acknowledgments:
For further information regarding this testimony, please contact David
Wise at (202) 512-2834 or wised@gao.gov. In addition, contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this statement. Individuals who made key
contributions to this testimony are Keith Cunningham (Assistant
Director), David Sausville (Assistant Director), Raymond Griffith, Amy
Higgins, Joshua Ormond, and Jade Winfree.
[End of section]
Footnotes:
[1] Federal Real Property Asset Management, Exec. Order No. 13327, 69
Fed. Reg. 5897 (Feb. 6, 2004).
[2] Except when otherwise required for reasons of national security.
[3] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-13-283] (Washington, D.C.: February
2013).
[4] GAO, Federal Real Property: National Strategy and Better Data
Needed to Improve Management of Excess and Underutilized Property,
[hyperlink, http://www.gao.gov/products/GAO-12-645] (Washington, D.C.:
June 20, 2012).
[5] Because this is a nonprobability sample, observations made at
these site visits do not support generalizations about other
properties described in the FRPP database or about the characteristics
or limitations of other agencies' real property data. Rather, the
observations made during the site visits provided specific, detailed
examples of issues that were described in general terms by agency
officials regarding the way FRPP data are collected and reported and
served to complement our analysis of data collection practices across
these agencies.
[6] In the case of VA, which did not categorize any of its building as
"excess," we visited sites where buildings had been reported as "not
utilized" or "underutilized."
[7] The High Risk Update also highlights challenges in securing real
property that federal agencies continue to face. For example,
management and funding challenges have hampered the Federal Protective
Service's ability to protect about 9,000 federal facilities managed by
GSA.
[8] See, GAO, Federal Real Property: Strategic Partnerships and Local
Coordination Could Help Agencies Better Utilize Space, [hyperlink,
http://www.gao.gov/products/GAO-12-779] (Washington, D.C.: July 25,
2012).
[9] The FRPC defines utilization as "the state of having been made use
of, i.e., the rate of utilization."
[10] For laboratories, utilization is the ratio of active units to
current design capacity. For housing, utilization is the percentage of
individual units that are occupied.
[11] The FRPC defines condition index as "the general measure of the
constructed asset's condition at a specific point in time," and it is
calculated as 1 minus the ratio of repair needs to plant replacement
value (PRV) multiplied by 100.
[12] Needed repairs are determined by the amount of repairs necessary
to ensure that a constructed asset is restored to a condition
substantially equivalent to the originally intended and designed
capacity, efficiency, or capability. GSA, Federal Real Property
Council: 2010 Guidance for Real Property Inventory Reporting
(Washington, D.C.: Oct. 25, 2010).
[13] The FRPC defines annual operating costs as "the expenses for
recurring maintenance and repair costs, utilities, cleaning and/or
janitorial costs, and roads/grounds expenses."
[14] See, GAO, Federal Real Property: Improved Data Needed to
Strategically Manage Historic Buildings, Address Multiple Challenges,
[hyperlink, http://www.gao.gov/products/GAO-13-35] (Washington, D.C.:
December 11, 2012).
[End of section]
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